The Difference Between Secured Debt and Unsecured Debt
Filing for Chapter 7 bankruptcy protection is not an easy decision to make. Chapter 7 bankruptcy is a potent solution to many financial ills and can eliminate many of an individual’s unsecured debts. However, there are different kinds of debts that Chapter 7 bankruptcy does not preclude you from having to repay. With Chapter 7 bankruptcy, you will still be required to repay your secured debts. What makes secured debts and unsecured debts different? The simple answer is collateral.
If you are experiencing a financial crisis, the Cedar Rapids bankruptcy lawyers of Hong Law, PLC, can help you understand the legal options available to help you put this current episode behind you. Contact our knowledgeable bankruptcy attorneys at (319) 294-5853 for a free and confidential case evaluation.
Secured vs. Unsecured Debts
Secured debts are backed up by some form of collateral. This allows the creditor to receive something in return if you are unable to repay what you owe. For example, if you take out a loan on a car, the car is used as collateral for the loan. If you do not make the required payments for the car, the creditor can legally repossess the vehicle and sell it to pay off what you owe.
Unsecured debts do not have the safety net of repossession for the lender. They cannot take away your belongings if you are unable to make payments. However, they may employ debt collectors or sue you in an attempt to reclaim what they are owed. Successfully filing for Chapter 7 bankruptcy can eliminate your unsecured debts, but not your secured debts.
If you are under intense financial pressure, it may be worthwhile to consider filing for bankruptcy. The Cedar Rapids bankruptcy attorneys of Hong Law, PLC, can help you determine whether Chapter 7 bankruptcy might be beneficial given your current circumstances. Contact us by calling (319) 294-5853 today.
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